In Part 1 the dynamics of an open market operation were analyzed for the case of logarithmic utility. Though such a utility function is useful for illustrative purposes, the implication that current prices are independent of current and future monetary injections is unsatisfactory. This...

What are the effects of open market operations? How do these differ from money falling from heaven? We propose a new explanation of how open market operations can change real and nominal interest rates which emphasizes three often mentioned but seldom explicitly articulated features of actual...

In Part 1 the dynamics of an open market operation were analyzed for the case of logarithmic utility. Though such a utility function is useful for illustrative purposes, the implication that current prices are independent of current and future monetary injections is unsatisfactory. This...

What are the effects of open market operations? How do these differ from money falling from heaven? We propose a new explanation of how open market operations can change real and nominal interest rates which emphasizes three often mentioned but seldom explicitly articulated features of actual...